The five steps you must follow to create an ethical culture

29 January 2019 -

Managers should follow these steps to promote good ethics at work

Guest blogger José Hernandez

How do you incentivise your team? And how do your measure your team’s performance? In most businesses, the answer to these questions will be hinge on growth, sales, or profits. However, as an advisor to global companies seeking to recover from the effects of major ethical scandals, I argue that this common approach to performance and reward is too narrow, and can create serious trouble in the long run for your business.

Every person and organisation has a ceiling to what they can achieve without starting to compromise their ethical practices and integrity. If growth, sales, and profits are the only measurements that truly matter, an environment of excessive pressure can result. When employees are pushed to an unrealistic degree, they can find themselves forced to cheat. And, as the sordid news headlines indicate, pervasive cheating inevitably gives rise to ethical scandals that can seriously damage an organization’s reputation for a long time.

To avoid this outcome, we need to take a hard look at the way our businesses operate. CEOs especially need to focus on building teams driven by integrity and actively promote a culture of ethical decision-making. This means a culture that encourages people to reflect on their conduct, ask questions, and think critically about why things are done the way they are done.

So how can CEOs achieve this?

HOW MANAGERS CAN CREATE AN ETHICAL CULTURE

1. Walk the talk – be a role model

The most effective way for leaders to inspire ethical conduct in employees is to demonstrate it every day in their own behaviour. This means asking the right questions to arrive at ethically informed decisions, getting all the facts about allegations of misconduct, and being willing to say no to business practices (and business partners) that conflict with the stated values of the organisation, regardless of how lucrative they might appear.

Simply put, there is a human dimension to corporate ethics and compliance, which concerns the personal integrity, judgement, and competence of an organisation’s people – most importantly the CEO and senior leadership team.

2. Incorporate ethics into hiring, promotion and reward

Reshaping a culture also requires changing how employees are hired, promoted, and rewarded. Looking at a candidate’s ethical track record is an essential component of due diligence, and should not be an afterthought in seeking out the best and the brightest. Ethical performance should also be a core consideration in promoting employees to positions of greater responsibility and prestige. Furthermore, if an organisation fails to visibly reward people for good behaviour (and sanction them for bad behaviour), the integrity culture begins to erode, and the unrelenting drive for profit and growth can cloud judgment and lead to ethical lapses.

CEOs sometimes have ethical blind spots, especially around the conduct of their most ambitious, high-achieving subordinates. Highly intelligent, charismatic employees are often allowed to operate largely unchecked; their departments and business units sometimes become semi-autonomous kingdoms lacking sufficient central oversight. I call these potentially dangerous characters the ‘superstar managers’. Part of leading by example means holding these high performers accountable for their actions and not allowing ethical double standards to persist and undermine the organisation.

4. Communicate your expectations

This means that there must be clear, consistent, and frequent communication of the organisation’s integrity standards and expectations to all its stakeholders, including third-party business partners. Communication can take many forms – for example, events such as town halls provide a visible platform for setting the ‘tone at the top’ as well as enabling open, two-way dialogue on ethical issues. It’s also important to introduce mandatory ethics and compliance training for all employees. In a global organisation, it’s critical to tailor ethics and compliance training by region rather than following a ‘one-size-fits-all’ approach; training materials need to reflect local cultural contexts and risks, and incorporate relatable dilemma scenarios and lessons learned from past lapses.

5. Promote a speak up culture

Corporate leaders should do everything in their power to encourage a ‘speak up’ culture and investigate all allegations that come to them. Whistle-blowers help bring vision to the wilfully blind; the messages they send should never be ignored or suppressed. As a leader, it’s essential to remember that whistle-blowers are not the enemy. There are too many corporate boards and senior executives who think their companies are doing well because there have been few allegations raised. It is more likely that the lack of allegations is evidence of a serious problem. Allegations are important signals about the health and culture of a company, including the openness of communication. People should feel safe enough to make them, and leaders need to be wise enough to act on them.

It may seem obvious that ethical transformation begins with leadership. However, in practice, senior executives and Board members too often view ethics and compliance as a niche functional concern, or a series of talking points, or a hindrance to strategy and growth; and this viewpoint impedes efforts at reform. Incentivising ethical conduct is an essential component of infusing integrity throughout the fabric of your organisation; in the long run, it will make for a more profitable, resilient, and sustainable business.

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